Physician compensation arrangements that exceed fair market value may violate federal fraud statutes and be subject to stiff financial penalties and prosecution, says a new fraud alert from the Office of Inspector General (OIG), the leading federal healthcare law enforcement agency. The OIG recently reached settlements in a dozen cases involving alleged violations.

Referral problem: The OIG, an agency of the U.S. Department of Health and Human Services, warns that compensation arrangements such as medical directorships must reflect fair market value for services actually provided. “Although many compensation arrangements are legitimate, a compensation arrangement may violate the anti-kickback statute if even one purpose of the arrangement is to compensate a physician for his or her past or future referrals of federal healthcare program business,” the alert says.

A few years ago, a court ruled that a hospital ran afoul of these rules and faced potential penalties in excess of $350 million—almost triple the amount of net assets the hospital had at the time. That case was U.S. ex rel. Drakeford v. Tuomey Healthcare Systems, Inc., C/A No. 3:05-2858-MBS (D. S.C.).

For more information: Regulatory matters and how they impact healthcare compensation valuation are fully examined in the BVR/AHLA Guide to Healthcare Industry Compensation and Valuation.